Tuesday, April 22, 2014

Grain Market Comments 4-22-14

Grain markets are called mixed to better this a.m. following a mixed to firmer overnight session.  A little bounce after yesterdays weak price action; some of the strength came from crop progress update that came out yesterday afternoon.

When the grain markets did end the overnight session we had corn up 4, KC wheat up 3, MPLS wheat up 1, old crop beans up 6, and new crop beans up 3.  At 8:00 outside markets have crude off a buck, the DOW mini futures pointing towards around an unchanged open, gold about unchanged a slightly weaker US dollar with the cash index at 79.820.

Yesterdays weakness seemed to come from a couple different things with wheat leading the pressure.  First off was some radar action in parts of HRW growing areas.  Now was it enough to help the crop?  To me  it still looks like the western part of the HRW growing area is plenty dry and the forecast maps I am looking at don’t show much relief. 

Another thing that lead to some weakness for wheat yesterday was the fact that we just haven’t seen any actual increase in US Wheat business because of the issues in the black sea.  That isn’t to say that at some point we won’t but so far we haven’t.

I also thought wheat had a weak close with reversal type action last week; so I thought maybe we seen some additional technical selling pressure yesterday.  All three of the grains now have charts that could be leading to some selling; and we still have the funds long corn and beans.   Here is CHS Hedging Recap of CFTC. 

One thing that I think we need to consider is the position the funds have in corn now versus a year ago as well as how short they got at one time last harvest.  It’s about 400,000 contracts difference right now; and if we don’t see headlines that are positive or a balance sheet that is positive we have to realize that we have risk that the funds decide to pitch length and maybe even go back to the short side.  If we have a 14 billion bushel crop or so do you think the funds will want to be long corn????  I realize that is a big IF, but my point is it could really be scary for prices should the cards end up laying on the table wrong.  As mentioned numerous times should all those cars end up being aces the upside potential remains very strong as well.  Bottom line that I am trying to communicate is the fact that we have plenty of risk and potential reward; so the recommendation is to use good risk management and find a comfort level in your marketing plan which should be unique to you and your operation.

Railroads continue to struggle; but it does feel like they have picked up a little with the warmer weather.  But to offset that I have seen some birdseed buyers actually cancel some car orders they have had on.  It seems that business has slowed down.  To me it feels like things could continue to be very volatile.  We likely continue to see the car back log hit when we really don’t want it to hit as producers get very busy and some demand slows down on the other end. 

Overall many have thought that basis would improve as car costs go down and it should; but what if we missed the demand?  What if there is simply too much supply to move at the wrong time?  I guess we need to realize that we have so many unknowns that I wouldn’t want to guarantee much in this market place.

Some where a little surprised on the lack of corn planting progress.  We are still about ½ of the last 5 year average; many where looking for a little bigger number then we got.  Overall most look at the weather forecasts and think that plenty of progress will be done; but maybe it is a little more debatable then that?

As mentioned above birdseed business feels like it has slowed down a little bit.  I think some buyers still need coverage but the bids have slipped a little the past couple days.  I did think that crush sunflowers only down 10 cents a cwt yesterday was a moral victory; but the overall market pressure didn’t lead to many calling to buy birdseed products.

Here is more market info from CHS Hedging Morning Highlights

Morning Highlights

By Jack Willbrand

  • Grain markets responded positively overnight after the weekly Crop progress report showed that we are possibly farther behind than what most traders originally thought.  Corn planting completion is at 6%, which is 8% behind the 5 year average of 14%. Despite the lack of movement so far this spring, there is optimism to catch up this week after rainfall was limited to under 1/10 of an inch in major corn growing areas during the last 18 hours.
  • As of 6:32 AM CT: The Dow Jones Index is up 16 points to 16,387, the S&P 500 is still at 1,865 and NASDAQ is up 7 points at 3,559. The US dollar slightly weaker.
  • Reports Today: Existing Home Sales will be released at 9:00 AM CT, Cold Storage will be out at 2:00 PM CT and API Energy Stocks will be released at 3:30 this afternoon.
  • Today is first notice on May ICE Coffee futures and last trading day on May NY Crude Lt.

  • Yesterday’s rains have moved east without causing too much concern for further field work delays.  The precipitation will benefit newly planted seeds.
  • The latest extended forecast shows windows for planting headway in the 1-5 day, then a wetter overall southeastern Midwest in the 6-10 day.
  • South Korea purchased 60,000 MT of US or South American corn.
  • Barge availably out of Savage/St. Paul will increase this week as empty boats push north. (Bid 485% for the Balance of April)
  • CK/CN is weaker overnight, trading at a 5 ¾ carry.
  • First notice day on May futures is April 30th.
 Outlook: Corn traders will primarily monitor the newest weather forecast and planting chatter this week. Opening calls 3-4 cents higher.

  • The trade remains focused on short domestic stocks and Asian demand.
  • Yesterday there were articles written on possibly more widespread Chinese credit defaults. Processors are losing the equivalent of $100/ton on product handled.
  • Trade will watch for overbought Chinese cancellations and more defaulted purchases from processors.
  • The SK/SN is steady, trading at a 12 cent inverse.
Outlook: Opening calls 6-7 higher

  • Violence was limited yesterday in eastern Ukraine as Vice President Biden visited in attempt to develop a peaceful reconciliation. 
  • Iraq passed up on a chance to buy 50,000+ MT of wheat.
  • Japan is in the market for 108,789 MT of wheat in its weekly purchase.
  • Yesterday’s reversal is speculated to have been a result of freeze damage being less apparent than first thought.  The CCI ratings were mixed yesterday.  HRW dropped 3 points to 290/500 and SRW improved 2 points to 354/500.
 Outlook: Opening calls are mixed. Outsiders will continue to watch for flared disputes in Ukraine and shifts in exports.

Grain Merchandiser
Midwest Cooperatives
605-295-3100 (cell)
605-258-2166 (fax)

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